billion euro short fall. and a northern chinese factory shuts down after a brawl involving 2,000 workers getting out of hand. 3w4re7plenty to get through including the ifo business climate index. it has fallen in september. 101.4. a little bit weaker than consensus forecast is what we were looking at. current conditions 110.3. and that's versus consensus forecast p 111.

euro-dollar dipping down. and the expectations index 93.2. so a little weaker across the board. and let's get reaction. joining us, julian callo. slightly weaker ifo, we thought it would be better. >> that's right. i would personally tent to dress a little bit more the pmi day take. not a surprise to find the pmi is still languishing. e t domestic economy might be in good shape and the budget balance likely close to zero for this year, at the same time,

germany has seen a big slowdown in its exports of southern europe and there seems to be growing evidence that exports are starting to falter a little bit it emerging economies. particularly i would think to china, which i think is affecting sentiment. it will be a disappointing reading given all the initiatives that have been coming out from the ecb recently. >> how much optimism is being priced into markets and do you expect this to take a lot of that out? >> i think on the one hand we have the evidence that business confidence has been deteriorating and in turn that is it imply potential for further downward revisions to corporate earnings forecast, further weak news out of the corporate sector at the global level particularly in the manufacturing sector. but on the other hand, i think we have to look ahead and see

what they're saying and doing and the fed we regard -- hello? >> go ahead, we still have you. >> sorry. yes. and i think we're finding that central banks are actually acting in a very desis difference way here particularly we think the fed has embarked on a regime shift. the fed will be fairly focused on bringing down unemployment and equity markets should be taking their cue from that, as well. i think the ecb will be a significant force intervening at the short end of government bond markets when the countries are in formal program arrangements and we think spain will be agreeing to be in a program by the 18th of october but quite possibly by the 8th at the euro group meeting. and on that note, on friday it's

really going to be a triple header from madrid as we're expecting announcements there both on the fiscal side with the deficit, on the bank recapitalization side, and finally on structural economic reform. so it will be a very important day i believe for assessing the conditions for pain to be entering into some kind of arrangement that with then unlock the ecb buying. >> and at the same time we get the details of the french budget. many major economies under the gun. julian will stay with us. >> xetra dax has gone back to the flat line. fifth month in a row ifo has fallen. focus on efficiency and exports, but is it enough? we'll get an analysts view. and we'll get out to hong kong to speak to one analyst who

still holds an outperform rating. >> and is it time to invest in russia? we'll get more at 11:20 cet. >> eurozone crisis could be increased to 2 trillion euros to provide the fire power for spain and italy. schaeuble is behind increasing the esm, but faces opposition from finland. how significant is this? julian, does the esm matter anymore? >> i think it matters hugely because the esm really is pivotal to unlocking the ecb buying. but as well the the along end of the market. so we need to assess exactly what it will be doing. and this report that you mention is quite interesting because

it's rez renktsisurrecting an i didn't come to much with regard to the esfs, which would be that there would be a form of partial insurance. in other words, the authorities would take some of the loss, but only some of the loss in terms of whether there was a default in the country's debt that was being insured. the markets didn't like the original idea to have the esfs providing that partial insurance because there was concern the esfa wasn't strong enough as an entity because effectively it is reliance on government guarantees. but now the esm, the key difference is it is going to be formally capitalized. 80 billion euros. so therefore it could have a lot more credibility as a kind of mono line in this respect. and that's why the officials are coming back to the idea because the esm has the limit of 500 billion euros of lending, but if it were to provide this kind of cover, in theory it would be covering 2 trillion euro which

is would be more than enough in theory to cover the financing needs of italy and spain for several years to come. so i think it is an important perspective that is starting to emerge here, but on the other hand, there is still going to be issues concerning that, it's still not clear whether this is really going to work its way through, because of course it will be more complicated for the markets to understand. >> and we'll walk through some of those complications in just a little bit. ross. >> just over an hour into trade now. we're weighted to the down side. a little bit more than 8:2. a little bit less than 8. chlt 2. ifo numbers just taking us off the session highs. last week pretty mixed performance. ex-are a down was up, now down 23 points. the c after the c was up half

a%. now down two-thirds. down 1.25% for the ibex. spanish bond yields have risen. 5.79% ten year. slow progress toward the bailout. we'll get into that more as we've heard from julian already. euro-dollar 1.2933 being dragged down by the ifo number. dollar-yen 78. and sterling hit a year's high of just nudging 1.63. not the best news if you're long dollar. let's bring you up to speed of where we are in asia.

>> concerns continues to weigh on stock. sang high composite dipped nearly 1% near the all important 2,000 level, but managed to stage a rebound later in the day to finish in the green. securities and developers led the turn around. media and publishing stocks also rallied in the form of industry reform plan. the hang seng, though, finished marginally lower, developers and i. ti firms with losses in financials and energy plays. fox con shares lost 2.6% hit by news of worker's riot. nikkei hate one week closing low while hurt pie the yen's strength. steel miners and industrials also under pressure, but shares for renaissance jumped over 30% in hopes of a government rescue

plan. samsung shares gained nearly 2% after winning a patent case against apple in a german court. meanwhile falling comeprices. that's all. back to you. and it's more troubles for foxconn, the company has been forced to close its factory in the city of taiwan in northern china. a dispute escalated in to a massive brawl involving 2,000 people late sunday. 40 were injured and a number of workers arrested. joining us on the phone is an analyst. alberto, good afternoon. first of all, what do we know

about what's happened at the plant? >> a number of people were arrested, a number of people injured. there were 2,000 people involved in the brawl. it looks like from the news reports that i've been seeing that that's 2,000 people out of about 80 thou,000 people that w there. foxconn is the parent company that owns the factory down i think 1% here in hong kong which means -- i mean in taiwan which means that overall the market doesn't think it's that big of a deal. so sounds like i would have expected a much higher impact on the stock if it had been a material event. it doesn't sound like it is. what they do in the factory, they make the back covers for the iphone 5.

so the actual component that goes into th assembly. >> we're getting reports about lines up being up significantly for the launch, some stemts put 8 million phones sold in the opening weekend alone. so as apple needs to move its inventory quicker than ever, will it run into supply did disruptions here 12? >> i think it will come from the display side more than the final assembly. when you talk about the back covers, there is inventory buffering. p there are obviously whatever happened may affect the production of the back covers. i don't get a sense that it seems to be a material event at this point as far as we can tell. i think the bigger issue is whether they can make enough screens which is also another factor that is not relate to the foxconn at all.

>> and just to think bigger picture about the significance of the event is it an implication of more political unrest or is it part of a longer lasting shift for a lot of these companies that rely so heavily on production in this part of the world? >> i mean, the issue of sort of labor unrest and labor demands in china has been and ongoing issue for many years. companies like foxconn and others to wage rauzs, try to improve working conditions. but apparently not fast enough to make up for the demands of people who want to basically have some kind of a meaningful job. these jobs are not particularly exciting, not particularly meaningful or fulfilling. so i can see the level of frustration could build up pretty quickly and even if

you're paid more money or have better working conditions, it still does not work. this is going back to the industrial revolution if you think about what happens in england and other places back in the revolution, you saw quite a bit of labor unrest and it weren't on for many decades. it will take a while to sort itself out and part of the transition to the developed world in a way. >> and a small impact on shares this morning. alberto, thanks very much for calling in this morning. the senate has passed a bill shielding american airlines from paying european imposed carbon taxes. the move is seen as increasing pressure on the eu to back town on the law which requires all airlines to take part in the submissions trading scheme. the senate bill would allow the u.s. transportation secretary to stop the u.s. airlines from complying with the eu law.

so we want to know this morning, should europeans be allowed to force global carriers including the u.s. to pay this green carbon tax. can europe force green on the u.s. basically? if you want to join the conversation, e-mail us or tweet us. you can respond to that or anything else you've heard on the program morning. >> theoretically you can because they control the air space, but i'm not sure we'll end up with an airline war. still to come, fear has no plans to close factories of fiat in the countries. they'll keep the carmaker from leaving for better pastures. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor.

wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. ave 50% on banners.

welcome back. head of the you're fee an parliament says he beings the kraekts of a european backing regulator will take longer than expected. s passage through parliament will take at least sick montx m and interventions could delay it further.

held land oig told the reporters earlier the better and merkel disagreed. no point doing something quickly if it wasn't going to work. julian, how significant is this war of words and how significant is it if you don't have the banking unit in place by january? >> to me it illustrates the difficulties you have in building a much more integrated euro area. really the banking issue should have been dealt with before we had money to the union. i think the expectation was if you have a single currency you'll get the banking union, but of course there's a lot of turf involved in regulatory issues as well there are

potential financial liabilities of considerable size. and it's really that latter point which i think is a sticky one at the moment. for example the german saving, banks are proud of the fact that they have their own system of regulating deposit insurance through guarantees, they don't want to be having a special extra people yum which could be used to bail out depositors in spain. there's a very big underlying risk here which is if you have a standardized system of deposit insurance, then if one country were to leave the and you are row, who would be actually paying and sxwaguaranteeing tho ghoss. liabilities could potentially be very large because we're talking about literally trillions of deposits that would need to be covered under deposit insurance and that's all connected into the banking supervision point. and i do think it's important that the eurozone does think very hard about the design of this. as we know, there could be important issues. it's important to have the

political legitimacy as well as a system that is designed well on a technical basis. and there's also the issue of the euro area in relation to the wider eu. so lots of potential issueses, but at the same time, it's important that these leaders do press on with this because certainly the euro area is exposed to a major shift of deposits that could come out. >> exactly the point i was going to raise up to you. what is your current understanding? the latest british numbers were getting worse in terms of 2k3of deposit flow out of spain. how do we stem that? what is the thing that will give confidence to say we don't have to keep putting money into a german bank instead? >> they have to have absolute confidence in their banks. if you for example look at what happened in the case of the uk, you can see it in other countries, as well, once investors feel that the banks are secure, then the deposits will tend to stick in them and

that's why the announcements that spain will be making on friday are on important because they should be really convincing that the spanish banks are going to be well capitalized subject to the independent scrutiny of the imf and of course the private agencies that were also involved there. i think that's really the most that can be done at this stage because it is going to be very important and at the same time to achieve the necessary agreement on deposit insurance across the eurozone as a whole just given the size of the liabilities that potentially germany could be exposed to. >> julian, good to see you. thanks very much for joining us. >> we know any new levies would increase the uk's desire to not have to participate there. moving on, though, bae systems has said it could be a ban do that talks for the merger. financial times kriling a person close to bae says the group will

not go ahead with the merger, quote, if its special security arrangement has to change to look more like that of eads. so what's it mean for the future of the deal? patricia has the latest from frankfurt. how significant is it that these companies sort of reassure the u.s. in particular on this point? >> i think it is absolutely crucial. and we have to clarify what it actually means when bae talks about special security arrangements. of course it is all about lucrative business within the u.s. national security have i in general. bae does have a part, they do have contracts out there and if that should be jeopardized or in any way reduced and not aided by the merger, that could result in bae being more critical about the whole long term idea of the merger going forward. plus as well already last week we heard from eads and bae that

conditions attached to it for the merger to go are too tough, they may just walk away. so we are a very long way away to really get the merger through. plus i think it's the 10th of october where we should see some sort of details being stepped out, but that day could also be further moved to the future. and over the weekend, there has to be not a single decision when comes to hollande meeting merkel on that issue. they are definitely monitoring the issue and we should continue to hear more foregoing forward. >> patricia, thanks very much. we always know when they're monitoring the situation that there's not a lot happening. >> greece is denying a report that it needs to find 20 billion euros of savings in order to receive the next tranche of aid. officials say the shortfall will be covered by spending cuts.

the french prime minister is suggesting we give greece plenty more time. what do people say on the ground about how it might pan out? >> they're disillusioned about more cuts. we're talking about find 1g 1.5 billion euro worth of cuts. and if we do manage to to get these cuts organized, what we are expecting to see is greece asking for a two year extension of the deficit targets. so the situation really does continue here in spain.

the local press here is actually suggesting that a hardening of the stance in the imf is what's created the delay here. the suggestion that they can say further write downs of the debt will be needed. that kind of fits with the article that we got from the germans on friday suggesting that this was of some debate going on in brussels. my suggestion from being there last week is that more more cash for greece is not in the cards. here, though, how well the greek coalition can manage to sort out their difference of opinion is also a key question in whether they can withstand announcing additional cuts when just three months ago, they were promising that they wouldn't. their first real test is the first general strike since they came into power and that happens on wednesday. and i think certainly from talking to people here that will

be very well supported. so we'll wait and see on that. >> all right. we'll talk to you a little bit later. >> similarities between the two when you're traveling back and forth -- >> if you have any thoughts, you can e-mail us. >> we'll be right back.

ifo index falls short of expectations and eurozone crisis continues to weigh on the biggest economy. greece moves back to center among concerns as athens denies a report it's facing a 20 billion euro shortfall. and foxconn shuts down a northern chinese factory after a brawl involving 2,000 workers. european stocks down session lows. ftse 100 off half a percent. xetra dax down a third. it was up before the ifo index came out disappointed. ib event x down 1.37%. just worth pointing out down

five months in a row the business economy index from the ifo. 50% of spnresponses were taken before the fall and constitutional court ruling. >> such a big week for sentiment and perhaps explains the dichotomy with the pmi figures there. you're seeing a little bit better risk attitude. let me rephrase that. we're seeing the same kind of rotation into quality reflected in some of the equity moves this morning. bunds and gilts benefitting from it that. >> and euro-dollar has come down to about the session low at 129.11. a four month high we hit a week or so ago go. elsewhere the italian prime minister mario monti has res assured that fiat has not

requested financial help. the ceo says it told the italian government the carmaker has no plans to close factories in the country and the strategy is focused on improving efficiency and boosting exports outside you're europe. they will not give details of their plans. steven, good morning. let's -- we'll talk about their plans for exports, but what are they going to do? because there is still massive overcapacity in eurozone car making and that includes italian factories. unless you square that problem, it doesn't matter what else you to, does? >> the problem really is you have very much two speeds in the auto industry in europe. on the one hand, you have the premium manufacturers and also wal

volkswagen doing well and running their plants at full capacity. obviously helped from sales in the united states and china. and then you have the latins, french and italians facing substantial issues of sales and excess capacity. fiat closed a factory in siscil, but that was done at financial costs. >> as an investor, all the political pressure to stay in italy comes potentially at what might be in the company's best interests longer term. >> i think will is really the issue. i think one of the quid pro quo for closing the plant in sicily was to actually at least bring more production back into italy

from poland and this is the new one they started producing at the beginning of the year and they already announced short time working so it's still not selling. >> is that reflective of concerns in europe or does it scare with what we heard out of daimler which was talk about slowing europe and china sales trends. >> daimler and mercedes specifically highlighted problems in southern europe. that plays into fiat's main market. >> and meanwhile journalist who had the story we're talking about fiat now plans to relaunch the alpha brand in the united states, create sort of a luxury sports maker market.

do you think thil's succeed and how much of a meaningful difference will it make? >> they've been trying to revamp alpha since the middle of the last decade with very limited success. volumes recently peaked about 130,000 unit. you're comparing that to the germans like bmw and mercedes, which is ten times the volume. so it gives you the scale of how far they would have to catch up. >> the cars do look fantastic. >> would you pay for it, though, that's the question. >> the problem is as you say is the cars themselves style list likely look very good, but they don't convince sufficient people to give up the german premium bra brand. >> and is that what's at stake for the paris auto show potentially for some of these other brands to try to convince buyers that it's worth it? >> the market is just as we've seen the success of the

premiums. they're moving towards these kind of brands. and if you're caught selling in the mass market vehicles which quality wise are very good, you're just not finding enough customers. >> if we had a swigs version of the european crisis, that would change investors point of view. >> fiat, the stock was down almost 50% last year. it is very heavily exposed to sentiment by italy, and you are row zone, sovereign debt and the like. >> steven, thanks for joining us. chinese luxury market has been helped by consumers, but the tide seems to be turning as the economy slows. there is a frugal rule on civil servants barring them from big spending and from accepting expensive gifts. still japan and china remain the world's largest luxury market

and our next guest says tapping in to asian consumers will still be key for businesses. joining us now, chief executive products at accenture. thanks very much for your time this morning. so are you -- when we look at these stories that we hear out of china with regard to trying to impose less conspicuous consumption, does that one make a big impact on consumer attitudes? >> what i keep referring to is the the fact that in the long run, the emerging economies, china being the most prominent, would continue to offer incredible opportunities for growing profitable businesses.

these economies continue to be dependent on on european and u.s. market. so whenever there is a slowdown in the western economies, there is a consequence in the local markets. as we go, there will be more and more domestic market and domestic consumption. so i expect that this trend which we observed today will change in the long run because of the demographics of these economies. >> so this still may be one of the big opportunities in the world given the numbers, given that there are limited prospects elsewhere i guess we could say. but in what ways are consumption attitudes shifting? for the demand 5, 10, 15 years time, how different might it look from what we're seeing

today? >> of course difficult to predict. first of all, you're right, that would be the emergence of these middle class. what we need to understand coming fr coming from european and american, there is no one single answer. emerging economies are very different in nature. the size is one element, but there are other elements. so i think that the potential consumers, you have these trends like the different tiers of cities in several countries where consumer behavior is still very different. so organization is one trend that will continue and will

dictate the consumer behavior. so the key word here is being granular and cement the consumers in specific ways. >> what is the best way, if that consumer story remains intact, what is the best way for overseas companies to connect with the consumers? how important is a digital strategy? this is of course a very good point. i guess something that we need to understand is consumers may skip one or two stages in the way they behavior compared to what we know in the western economies. so digitalization and the way we connect with consumers in the digital environment will be

relevant and is relevant today and say much sooner than we would have anticipate the from north america. there are three technologies that i would recommend companies to watch carefully. one is digital and all the digital interaction. the other frankly is mobility. mobility will be huge in all emerging economies and will continue to grow as the young population become the next generation of consumers. and the third is analytics. because the segmentation is fult alley important the way consumers can be identified and served. >> digital, mobility and analyt analytics. thank you very much to for your i'm today. japan central bank surprised

many last week with itsing a agrees suffer easing moves, but as the boj minutes out today suggest, they may still not be done just yet. let's go to the nikkei. >> bank of japan released the minutes of the policy meeting held in august and one member made a notable comment suggesting that the boj may need to exert rates. japan has yet to overcome inflation despite efforts. last week the boj decided to aggressively expand the size of its asset purchase program acting quickly after analysis suggested that japan's economy remains weak. earlier today, boj's deputy governor reiterated that the central bank stands ready to take bolder policy moves. the recent wave of anti-japan

protests in china has also fueled concerns about china related risks. back over to you. >> and in australia, the treasury has given us the revised reading. there's both good and bad news. >> australian government unveiled its final budget outcome revealing that the books are in slightly better shape than first thought. budget deficit came in at the $47 billion, improvement from the $44.4 billion the government estimated in may when it handed down the budget papers. wayne swan and his team have their work cut out for them as the government strives to deliver by 2013. mr. swan saying the recent economic headwinds and falling commodity prices eroded tax revenues and new savings measures will be needed if the

promised surplus is to be achieved. >> as i've said on a number of occasions because of factors like the high australian dollar, a cautious consumer, subdued prices and investment boom, we don't expect taxes to return to pre-crisis levels over the forward estimates and we can see that in the numbers yet again today. >> the government's broadcasting the $1.5 billion surplus will fiscal year and we'll get another update on just how the budget is progressing when we get the media update in november. back over to you. >> matthew taylor with that. staying on australia in just a minute, rio tinto says it expects to cut coal jobs, retrenching in the face of increasing costs, lower coal prices and the company shares this morning down almost 2%. rio tinto just the latest big miner affected by the collapse in prices we've seen since earlier this year to turn around by either lowering capital

investment or cutting jobs. risk going forward to the aussie dollar and australian economy. >> kind of interesting after the fall off in oil, we haven't seen things like canadian aussie to create the same amount from the fall in the oil prices. >> which is partly why people think the central banks may have to be more responsive to shove it down. and again in a relative world, it's a lot harder to get that lift. >> moving on to another story, former police chief who fled to the u.s. embassy is facing 15 years in prison. court found him guilty of defection, bribe taking, abuse of pow are and help to go cover up the murder. and the celebrations originally slated for thursday

are now going to be a later date. two countries have been feuding over a set of islands in the east china sea. japan's prime minister is warning china that violent protests over the territory dispute could hurt its economy. inspector general of the wto is playing down the dispute especially when it comes to trade fp in an interview, he said the recent spats between washington and beijing don't yet amount to trade war. >> fortunately there is more bulk than bite. and we are in a world where there are no more trade wars. >> he went on to say while politics creates trade friction, the wto has the right mechanisms in place to deal with these disputes. coming up, tra links is

next. can cloud computing dissolve borders for companies doing business abroad?

the senate has passed a bill shielding u.s. airlines from paying european imposed carbon taxes. the move is seen as increasing the pressure on the eu to back down on the law which requires all airlines to take part in its emissions trading scheme. the u.s. is just the latest country to try to exempt its airlines from having to pay these taxes. should the europeans be allowed to force global carriers to pay this green carbon tax? e-mail us worldwide@cnbc.com, tweet us a at c increases weks, of course you can reach us directly to respond to that or anything else you've heard on the program this morning. >> meanwhile the uk has pledged a billion pounds towards a new state bank to help boost lending on to small businesses. the business secretary vince cable announced the plans at his

party's conference over the weekend. he said the government hopes its backing will be snatched by a similar amount from private cable. the new bank could support up to 10 billion pounds of new and additional lending. interesting thoughts about this. >> i think this is hfr -- when you're talking about putting taxpayer money directly at risk, it get the government involved in the business seems like -- >> apparently there are already business banks doing exactly the same thing. so we need to find out how it works. but the idea is it's going by the bank system. that may be the problem with it. it still has to go through the bank system. >> just interesting on the one hand they're cracking down on banks with so many different kinds of regulations and trying to force them into different businesses and out of others while doing things on the

monetary side. now trying to funnel capital through the banking system. and if they're going through the existing banking system, fine. but if they're doing anything that would expose them more correct corre directly to the risk -- >> i think that may be the problem. now, can cloud computing dissolve borders? beccy meehan spoke to howard and started by asking him how remote data storage can help overcome challenges for companies doing business abroad. >> this allows customers to build their own private clouds so they can continue to manage their own infrastructure inside their data center, but provide to their business as a service, but also obtain it from public clouds and service providers. so it dissolves some of the borders from a technical point of view and allows that service to get delivered. but on top of that then, there are shall some challenges when it relates to things like

privacy of data, for example, and so here we encourage customers to really think about and classify their applications and their data sets. and they may decide to have some of that work still done in their own environment as a private cloud. and then utilize service providers or other cloud services where the regulations allow. >> so there are lots of issues for that cloud based business. are there opportunities within the differences between regions for your business to provide extra services to patch that kind of differential approach? or is it more of a hindrance for you? >> to us as a provider of technology, it actually is i wouldn't call it a benefit, but a tremendous opportunity for us. because our view is there's in

the one uber cloud in the sky and everybody will access. there will be clouds for purpose. there will be clouds inside of our own customer's data centers, but we'll have multiple service providers and sometimes they'll be delivered in a particular geography, there will be for vertical market, there might be regulatory or compliance or security reasons. so we believe that there are multiple clouds that need to be managed and orchestrated together. so us as an enabler and provider, it gives us great growth outlook. >> do you therefore as an enabler have to divide up your business degraphically, as well, to reflect the differences that your clients experience? >> we certainly operate in 60 countries around the world today. over 100 countries around the world with and through partners. so we do have local understanding, but we still deliver on a global scale. we develop our technology

foundationally and then taylor to each individual markets around the world. >> from your corporate perspective when you look at new geographies and how you can expand your own offering around the world, how do you find the best way to get into a new country and new region? >> so this is really where the partnerships are so critical to us. we've developed a partner ecosystem to help with taking our technology either directly to customers or building their own cloud services and delivering that to customers. and we've got partnerships of all sizes and flavors. he we have worldwide partners and also local partners. when you go into it a latin america or north africa or even mid sub saharan african, these are places where business is

just done differently and there's different infrastructure capabilities or lack thereof and it's really utilizing that local partnership understanding. >> partnerships or acquisitions? >> we actually do a bit of both. although most of the ones we make, in factual the ones i can think of in the last five years, are technology acquisitions. we do make acquisitions around the world, but most are developed in the u.s. the go to market partnerships we do as a partnership, not an acquisition. >> each week we look at how the financial crisis is affecting global trade. it airs monday at 10:50 central european time and there is plenty more on tradelinks.cnbc.com. in asia tomorrow, japan-china economic association is sending a group of around 20 key executives to beijing to reinforce business ties over in north core re, a the national

legislative convenes in pyongyang for just the second time this year. and the reserve bank of australia delivers its twice yearly financial stability review. they provide more guarantees than actually loans. so we'll ask about that. and next, how to make money in these markets. investors are still lured by the safety bucket appeal of covered bonds. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking.

you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good. [ male announcer ] fedex office. nowners.

welcome to "worldwide exchange." here are your headlines from around theed world. surprise fall in the ifo index pushing the euro and stocks lower as the eurozone crisis weighs on europe's biggest economy. >> ath thenens denies a report facing a 20 billion euro shortfall. and mitt romney and president obama disagree over israel ramping up the rhetoric. >> and foxconn shuts down a northern chinese factory after a brawl involving 2,000 workers.

germany's sentiment index falls, and the mood continuing to u.s. futures. closing in on the start of the trading day, dow jones implied to open lower by more than 35 points. nasdaq and s&p 500 also looking to shed their gains, as well. take a look now at the cnbc ftse global 300. down a third of a% in light of that data which hit just about an hour ago. european markets she the ftse 100 down 0.4%. xetra dax this one in focus this morning, that's down 0.6%. cac 40 down almost 1% this morning. this ahead of a key budget

unveiling. ibex 35 not benefiting from the risk off attitude. down 1.6%. >> and i think the ifo number, we had a better pmi out of germany last week, so the expectations it would hold up and it didn't. but it is worth pointing out 50% of the responses were taken before the constitutional court ruling in germany. quite a lot of paper being issued by italy this week. they yield back just over the 5% mark, as well. you can see lower this morning 1.72. euro-dollar back down to the 1.29 mark. aussie dollar steady 1 .04.

sterling-dollar moving away from the highs. that's where we stand in european trade, what about what's happening in asia? only one person qualified to bring us up to speed. >> concerns about global economy continue to weigh on sentiment. it was a choppy session for the shanghai composite. it managed to recoup early losses after dipping near the all-important 2,000 point mark to finish higher by 0.3%. securities and developers led the rebound. media and publishing stocks rallied on reports of industry reform plans. but losses in some resources placed capped gains.

foxconn shares lost it 2.6% after reports of workers riot. the nikkei hit a one week closing low in thin trading. steel maker, miners and industrials also tumbled, but shares of renaissance jumped over 30% of government bailout hopes. elsewhere financials and industrials weighed on south korea's kospi, but samsung electric tropic shares gained merely 2% after winning a patent case against apple in the german court. meanwhile falling commodity courses continue to drag the aussie market lower by about half a percent with miners extending losses. back to you. clis cbusiness climate down for the fifth month in a row.

it said downward trends are still dominating especially for d exports. that's been the main factor this morning. patricia, the better term out of pmi last week, you wonder which is more accurate and reflective. >> well, that is a good question. the flash pmi data did really get people's hopes up for the ifo index. what is more leading, that is the question. but a lot of it is also down to new order volume. and you order volumes as we know since the beginning of 2012 has started to come off a little bit. so the trend there isn't too positive and it seems that the underlying economy starting to

see more the pinch what is happening considering that a lot of the exports in germany are within this european zone or the eurozone. so big impact there. and also we've seen quite a bit of data coming through from the car sales numbers in europe and they have been everything down about 6.6% in the first eight months of the year. even though that's a bit of a lagging indicator, but one of the most important industries in germany is starting to feel slo-mo men item. most important is how is the ecb going to view these figures in the light of energy prices and also the gdp estimates now by the ifo to increase by 0.1% for the third quarter, is that going to come down. yes or no. >> patricia, thanks very much. the eurozone crisis fighting fund could be increased to 2 trillion euros to provide the fire power for spain and italy.

>> the passage of the law through parliament will take at least six months and interventions could delay it further. and you can see there down about 0.8%. french president hollande told reporters the earlier the better merkel disagreed saying there was no point doing something quickly if it wasn't going to work. and amid all of this, our next guest says investors are continuing to buy into covered bond market. and this market has underperformed equities. right now you're looking it at the euro covered bond index.

welcome. this asset class is just starting to emerge in the u.s. just starting to before the financial cli sis hit, now rbc has come to market with this registered listing, i guess. but is actually the appeal of safety right now being undermined by the search for yields? >> well, again, with every portfolio, you're looking for sections where you want to have yield and then where you want safe investments. what's interesting about the covered bond market around the world is we're seeing more and more investors starting to diversify into this market in a fairly big way. just for example a medium sized bank i talked to last week over the past six months as put 10% of their liquidity into the covered bond market. before then, they had no investments at all in this asset class. >> explain to people who may not be as familiar with covered

bonds, what is the appeal? >> first of all, i think there's very good track record. they've been around since 1769 and never been a payment problem. and we've had periods of extreme economic stress such as hyperinflation or even more. and they've always been paid in full and on time with interest. so the track record itself, and then i think what is also appealing is for the investor, there's a dual recourse in covered bonds. so in other words, you have a recourse to the bank that's issuing and in the case of a bank insolvency, you have the income from the covered pools backing the bonds. >> first time the sec is going to allow -- there have been private placements before. now going to allow them to be offered to i guess retail clients. but repackaging mortgage debt. which has had a bit of an issue.

>> for the occcovered bond peop of the world, in a covered bond, if one of the as sets fail to perform, it no longer qualifies for the covered pool. so we need to make a distinction between the traditional assess backed security where you live and die on the performance of the pool at the beginning to covered bond where you have a dynamic support. so if a mortgage fails to perform, there's constant renewal. >> that's one of many features that makes it more attractive, but it comes back to the point over in core re, a they've had trouble getting their covered bond market off the ground because of the -- you have issuers borrowing at historic lows. so to some extent you have this -- while this is such a

search for safety right now, at the same point, there might be more nand for these assets. >> low yields are creating a search for yield and safety if you can. but what is interesting about the covered bond market is the number of new investors entering the asset class for the first time. forget not too long ago, this asset class has been dominated by the fund for covered bonds, so it was considered much more of a german centric product. it's now spread to many different countries. there are countries in the process of establishing legislations. and now it's become much more of a global asset class. so as people search for yield, they look at -- >> do you need specialized legal frameworks for this to take off in the states? >> it helps quite a bit. at the end, what they want to make sure is a covered bond

investor is if everything does go horribly wrong, that the cash flows and assets are really truly protected. >> and on a scale of 1 to 100, are we there with that framework to support -- >> more and more countries are establishing framework. for example, we see in new zealand an attempt probably by the end of this year many early next year to put in covered bond legislation. so this is the pattern that we've seen in europe and also more and more around the world. >> thanks very much for stopping by this morning. appreciate it. >> bonds coming to a u.s. outlet near you soon potentially. next, we'll be out to athens where efforts to find crucial budget in-it. bob...

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euro stocks are pushed lower. and athens denies it's facing a shortfall. and foxconn shuts down a northern chinese factory after a brawl involving 2,000 workers. greece has denied a report that it needs to find 20 billion euros of savings to receive its next tranche of aid.

the shortfall is around 13.5 billion euros and it will be covered by spending cuts worth 11.2 billion protected revenue. julia is back in athens. and joins us for more. we have this report going on on, we have the french prime minister suggesting we should give greece two years off or extend the time frame. what do they say on the ground there? >> i think people here are just very disillusioned. irrespective of how many cuts were talking, just piling on yet more austerity. and certainly the people here are galvanizing toward 24 hour strikes for the set for wednesday. two large unions of course for them, this is all part of what was supposed to be parliament discussing the agreement of these spending cuts. the government still has to decide whether these cuts will come from. so that situation is ongoing.

and certainly people and i have been speaking to these strikes and the protests that they were expecting on wednesday will get yet more frequent. the local press here is saying that the third -- government is hoping to get them passed in parliament before the summit on october the 8th. also is suggestion that some will look to expel some of the members should they vote against it in parliament. also a speech expected this week to help understand why these cuts need to be made. and this is the ultimate question. irrespective on the european side, is there going to be enough flexibility to allow this coalition to stand together and make -- >> we apologize. we've had interrupted sounds. so apologies.

everything in greece, sometimes it's on, sometimes it's off. a new report found the first three days of iphone 5 pre-orders equal the earlier apple record set by the iphone 4s over the course of a month. >> lines were up 80% and expected to sell 8 million just in that first weekend. >> the reason for the record sales is that more people are in the smartphone market than ever before and there were a substantial amount of holdouts who waited -- they were waiting for 5. >> and we did have the analyst we spoke with earlier on the program saying he doesn't expect this to be a major supply for apple supply chain, the foxconn brawl. that this particular factory assembles a lot of the back of the phone.

you can tell i'm not very technologically -- >> that's just a phone back. magazine says it's only worth $15. the issue, number of users accessing facebook on mobile devices continues and it has yet to figure out a way to monetize on a mobile platform. and cable television networks at the emmy awards for the first time this year, not a single network show was nominated in the best drama category. show time's homeland took home several emmys including damon lewis' win for best actor and claire dane's win for best actress in a drama series. >> i know mad men did not get

its fifth emmy. they should bring mad men over here. >> it is here. >> mad men's on tv somewhat do i know. well, stick around, is it time to invest in russian stocks? we'll have more after the break.

the snas has passed a bill shields u.s. airlines from paying european imposed carbon taxes. the move is seen as increasing pressure on the eu on to back down on the law which requires all airlines to take part in its emissions trading scheme and it's not just the u.s. we asked if you think the eu should be able to force the carbon tax and the e-mails are coming in. jeff says the carbon tax is a horrible way to get a good result. what about in-sven advising and letting the airlines go get that carrot. joe writes in saying u.s. airlines doing business in europe must follow european green carbon laws. it's simply a cost of doing business in europe. not a trade war. what do you think? tell it us here.

e-mail or tweet us. >> and meanwhile ahead of the u.s. open, this is where we currently stand with u.s. futures. we're implied for a negative start. a weaker session here in europe. ftse 100 down about a percent over the course of last week and down over half a percent this morning. or just about that. down half a percent for the xetra dax. up half a% last week. cac down a percent. all dragged lower by an ifo sentiment index that came in weaker than expected despite the fact pmis were better for germ any. bp will point a russian director to its board in a bid to try to repair ties with moscow. dudley met with putin. this according to the sunday times. >> and as russia continues to privatize key sectors, it's

increasingly looking to asia for investment. for more on this, we're joined by douglas helfer, senior fund manager at hsbc. tug h douglas, thanks for joining us. let's start with the point here about russia's privatization schemes. and to what extent this is facing the country perhaps more eastward than ever. >> yes, the new putin administration has pledged to continue the privatization process. they took a big step with the placement of about $5 billion of spare bank shares in to the market and there's a long list of additional companies expected to be coming to the market in the near future which we view as very positive for the economy and stock market. >> and on that point, you to like opportunity here. you see opportunity i guess in the russian market. and can you explain for a country that seems at the moment to be plagued by political trouble and perhaps supply side issues and even this morning

focus on whether grain exports will continue a pace why you you think stocks look attractive here? >> russia is the ultimate high beaded market. in the current risk on risk off pattern that we've been seeing, it is either driven up or lower by domestic factors. rush shap factors are pretty attractive. the election is out of the way. political risk is subsided. a new reform program being spro sbr duesed and the stock market is at extremely low levels of valuation. that's the key thing is that valuations are near the bottom end of their trading range. currently trading on a pe sort of a benchmark basis of around five times which is significantly lower than the average. so it's a great valuation story. >> the one thing is investing in russia to me still seems like a play on commodities.

so we might have a developing middle class, but isn't it a bet on something that will be dominated by factors elsewhere? >> currently commodities dominate the market and are the strong driver of the growth we've seen a in the economy for the last ten years. but there is a lot more going on. . as you mentioned, there is an emerging middle class in russia. we've seen gdp increase. and that's driving the consumption. there is more to the story. i think the putin administrat n administration, priority is to shift more toward consumption and we should expect to see these driving -- the economy and the stock market going forward. >> would it be lom firms that benefit from that or would it be

international firms? >> it should be both. there are a lot of multinationals involved in russia. the fast moving consumer goods companies, automakers. but there are a lot of domestic russian businesses involved in domestic or yen at a timed sectors, as well. obviously in consumer banking, consumer retail, automotive -- many other industrial sectors, as well. so it's really a bit of both. >> douglas helfer, thanks very much for your time today. >> still to come, we'll have the latest on obama and romney, u.s. china relations and a preview of the trading day ahead. yeah, i'm looking to save, but i'm not sure which policy is right for me. you should try our coverage checker. it helps you see if you have too much coverage or not enough, making it easier to get what you need.

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surprise fall in the ifo index pushing the euro and stocks lower as the eurozone crisis weighs on the biggest economy. and greece denies facing a shortfall. and obama and romney d disagree over israel. >> and foxconn shuts down a northern china factory after a brawl involving 2,000 workers.

still seeing red across the board. dow jones industrial average implied for shed 45 points at the open. this keys off the mood we've been seeing in europe. weak sent nmt europe's biggest economy, although it did come at least for about half of those surveyed before some of the key moments that boosted eurozone confidence over the last couple of weeks. if we can take a look at those european markets, ftse 100 down half a percent, xetra dax down a little more than half a percent, but off it weakest levels of the morning. cac 40 is down over 1% which is up from the last time. a bigger loss from the last time that we checked in. and the ibex shedding 1.5% this

morning. spain of course in plenty of focus this week. expecting to hear from the country perhaps as soon as the end of the week with regard to whether it will agree to a line credit, do the things that will support the economy or require the country to ask for more help. >> so what are investors to do at the beginning of a new trading week? here's the thoughts of some of the experts that have already been on cnbc today. >> immediate to allocate where the better growth profits are. stock and bond markets in spain and italy definitely defying gravity. >> you can't get otherverly pose on the u.s. dollar and japanese yen right now. so i think the equity markets as well have probably got quite neutral bar.

just waiting for a little bit more of a pull back and then perhaps to get in with fresh loans next week. >> talking about globally. we're seeing tremendous cash flow growth and i think we will continue to see that. >> mitt romney and president obama sat down with cbs' 60 minutes in separate interviews. romney criticized president obama for res fusing to meet with israeli prime minister benjamin netanyahu saying the exact opposite approach is what's necessary.

president obama described israel as one of our closest allies in the region and joining us now is fred hopper, chairman and president of the export import bank of the united states. fred, great to see you again. good morning. >> good morning. >> how concerned should we be about the situation in israel, the situation in iran and the rhetoric we're hearing from both sides over the middle east? >> the tragedy last week was a terrible tragedy, and president obama and all of us condemned the violence we saw in the mideast. so i think that's very clear. >> how concerned are you about the situation? this isn't just an issue of how the president is handling. and its and he really on the ground a case of whether these two nations are increasingly in a war of words at least. >> well, the united states and

president obama has made -- >> loobs liks like we've lost t line. >> i think either's a switching issue. it's talk more about japan and china. we'll get fred back. china has put off a ceremony to celebrate ties. originally slated for thursday and will be moved to a lirt date. the two countries have been feuding over a set of irelands in the east china sea at the same time japan's prime minister is warning china that violent protests over the territorial dispute could hurt its economy. asking china to discourage any behavior that could scare away foreign investors. >> in an interview with cnbc, he said the recent spats between washington and beijing hardly amount to trade war.

>> i believe fortunately there is more bulk than bite. and we are in a world where there are no more trade wars. >> and he said while politics often creates trade friction, there are the right mechanisms in place to deal with the disputes. and the former police chief who pled over the murder of neal hayward is facing 15 years in prison. a court found him guilty of defection, abuse of power and help to helping to cover up the murder. his wife is serving a suspended death sentence for hayward's murder. fred is back with us. sorry for that technical problem. we want to talk china with you, as well. go back the to the middle east

because you've given a low to a company to purchase u.s. equipment to build a nuclear power plant in the region. obviously we're look at what we can do in trade are these projects being speed up or delayed because of the tensions between israel and iran? >> these are large scale infrastructure projects, in planning for many years. what you're referring to is the eua is building its first nuclear power plant and we'll finance about $2 billion worth of it, create building 5,000 jobs. that's really what we do is part of president obama's national export initiative, but equally important, it's creating a lot of jobs in the mideast. the greatest thing for stability is getting more people to work, more young men to work in the mideast and projects like this,

dow chemical is building a large petrochemical plant in saudi arabia, a couple on the boards in egypt, all those are creating new jobs and that's what we need to stabilize things. >> you've just come back from china. everybody is dominating the news as being japan and china and how damaging that can be to trade. what have they told you about that spate? >> that spate was automatic over the headlines when i was there just about a week ago, but i think the important thing is our economy we need to be exporting more and consuming less. they're looking to do less exporting and create more of a consumer economy.

that was the much more dominant theme when i was in china last week. >> there was rhetoric coming out of the united states towards china and the wto discussions, a lot of things being put to the wto right now. >> i think there's not a trade war. that may be a great headline, but not the reality on the ground. right now we export over $100 billion worth of goods and services to china. it's our third largest market. and it has the potential to be a large market for u.s. goods and services, whether it's airlines from boeing or caterpillar

equipment or general electric or many small businesses that we help support. so i think there are a lot of potentials there. >> the uk has pledged a billion pounds towards a new state backed bank to help boost lending. the government hopes its back will be matched by a separate amount there private cable. new bank could support up to 10 billion pounds of new and additional lending. fred, we were talking about this a little earlier. ross pointed out that this kind of model exists in germany and to some extent the u.s. would you say this is similarly set up to what the uk is proposing? >> the fact of the matter, is and i ran a small business for

many year, it is a lot harder to get credit if you're a small business. many large banks, there's a lot of money to be made in hedging and derivatives. it's a lot more cost tloi service small business customers. we have a program called global credit express that provides loans up to half a million dollars that we're making as direct loans. we're working with the banks but we're providing the funding becauses it is still so hard for small businesses to get he those loans. president obama has made a big push on the small business administration that also works closely with u.s. company, small businesses that are both trading and doing much more about porting. >> how do you work out when to make the loans and when not to? the fear is that we have the taxpayer going to fund businesses that might not pay the money back. >> for us it's very simple. we're a self sustaining agency. the fees we collect for the work we do have to pay all of our expenses. and on top of that, the last five year, we've delivered $1.9 billion to the taxpayer for

deficit reduction. so when we make a loan, we have to have a reasonable assurance of being repaid because actually the fees we collect have to pay all of our expenses and they do that and more so. so in our case, it's very clear how we make those loans. >> all right. fred, thanks for joining us and our apologies for the technical problems we had earlier. >> thanks for having me. >> germany auction, 3 billion euros in size that went off with a 5.1 bid to cover ratio and a yield slightly less negative than last time, but still negative. and germany has retained 60% of the issue and an auction of just about 1.2 billion out of that 3 billion total. >> and we have no information about the media report of for 20 billion euro hole in the greek budget, they will keep waiting for the troica report.

>> always waiting on troica or something. still to come, could facebook stock be headed to $15 a share? one investment magazine seems to think so. bob...

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discussing the senate has passed a bill shielding u.s. airlines from paying carbon taxes. it is seen as continued pressure on the eu to back down on the law. so we asked if you think europeans should be allowed to have global carriers including the americans pay this green carbon tax. jeff e-mails in from morning to say the carbon tax is a horrible way to get a good result. talks about incentivizing to let airlines go get the carrot other ways instead. joseph writes in from washington state to say, however, u.s. airlines doing business in europe must follow european green carbon laws. it is simply a cost of doing business in europe, not a trade war. another viewer has tweeted in to say it's a shame that the one place that the senate can finally come to a unanimous decision has to do withstanding in the way of doing something

about global carbon emissions. you can e-mail us or tweet us. >> meanwhile this morning the main determiner of trading sentiment is being driven by german sentiment data. the ifo declining a fifth month in a row. warning that german momentum slacking in the third quarter. also said downward trends are still dominating especially for exports. that news projected the euro down to 1.29. >> and if you're just joining us, these are your headlines. a surprise fall for the ifo index furnishing tpushing the e stocks lower. >> athens denies reports of a smart powell. and foxconn shutting down a factor involving a brawl involving 2,000 workers.

the company has been forced to close it factory in northern china, dispute with, woulders escalated in to a massive brawl involving 2,000 people late sunday. foxconn says 40 people were injured and a number of workers arrested. the company has a history of labor unrest. >> apple does it again, a new report has found the first three days of impt phonof i iphone 5 equaled a month of iphone 4s. the explanation, more people are in the smartphone market than ever before and that there were a substantial amount of holdouts waiting for the 5. >> staying with tech, barons is negative on facebook believing

the stock is still overpriced at $23 a share. just below that in latest friday trade. barons says the stock is only worth $15. the issue, the number of users accessing on mobile devices continues to rise and facebook has yet to figure out a way to prove it can monetize on a planned mobile advertising platform. take a look at u.s. futures. they are still pointed lower for the morning. can anything out of the u.s. turn that around?

european stocks are down at the moment. german finance ministry saying leveraging the esm to two till i

don't know euros is not realistic. follows reports that mr. schaeuble was talking about that. >> and julian callow says being able to do that would be significant from an investing point of view. so let's see what scott richter things joining us from ohio this morning. and scott, first of all, good morning and thanks for getting up for us. >> sure, good morning, kelly. >> the question here for you, i'm sure being in ohio must be somewhat plus traiting for these headlines out of the eurozone to constantly drive risk assets one way or the other. are you looking at sort of the resolution over some of these bailout funds as significant when it comes to allocating money or it for you is it just noise in the bigger picture? >> i think it has a positive effect because the european financial conditions are at the margin getting better. and when we look at the strength in the u.s. and in china at least talking about infrastructure plans in

spending, we step back and say that's a collective move from a risk perspective to the better. so that completes us to the stock market. and american stocks you like them despite the fact they're at mull it i year highs? >> we come. and our expected returns work leads us to stocks. quantitative work leads us to stocks. technically it's a very broad based rally. a lot of volume in september and follow through. so we like it. short term, though, the market is truly overdone. our risk indicators show thaws we're hat high levels right now. so we think there has to be a consolidation or pull back. this will be a tremendous number of events between now and early 2013 to keep us occupied and

give volatility a chance to come in and give us a buying stunt. so that's the election, fiscal cliff, china's results right now are very woeful. and any bumps and grinds that come out of the mideast or europe will give us an opportunity. >> the tail winds that we've d had, do you think they're all in the price then? >> i think they are, but here's the difference i think with qe open-ended. all the other had been finite. with them having an open-ended reign, i think we can make the connection from asset prices going up to confidence both consumer and corporate and give time such that summers will spend, companies can spend, they can hire. and i think that's been the missing equation.

>> some are pointing to how precious metals have behaved saying you've got unthe run up, not necessarily in the base metals. to you is there a legitimate point or does that point more to weakness than strength? >> i think the run up in precious is related to qe open-ended. and whenever there are negative real interest rates, gold has the propensity to go up. on the base metal, we're not getting any traction right away, but we're hoping the pboc comes in, that the infrastructure spend starts and that they start to get traction. and then i think you'll truly get a follow through on the base metals. >> scott richter, thank you for your time this morning. and ross, i'm starting to think it's waiting on the pboc is the new waiting on iphone 5. >> we'll see what happens. coming up next, it's "squawk

box." we hope you have a profitable day.

today's top stories, days after the iphone 5, a main supplier is forced to shut a factory in china. the call on commodities. oil, gold and copper falling today amid renewed worries about a tepid global economy. and stocks try to finish september strong. the dow only been down for four sessions so far this month. it is monday, september 24th, 2012. "squawk box" begins right now.